The bakery indicator: Poland is Europe’s success

Commentary: Former Communist nations catching up with the West

By

BarryWood

Barry Wood

Even remote Polish towns like Bolesiewiec have excellent bakeries, pubs and shops, the fulfillment of Vaclav Havel’s dream of a prospering post-Communist Eastern Europe.

WEIMAR, Germany (MarketWatch) — Traveling on the train to Weimar, I met two young Fulbright scholars who are teaching English in eastern Germany. We were coming from Gorlitz, the picturesque German town on the River Neisse, whose eastern part became Zgorzelec, Poland, in the territorial changes that followed World War II.

The young Americans had visited Zgorzelec the previous evening and expressed dismay at its relative poverty and rundown condition. I told them that I too had been in Zgorzelec but had quite a different assessment. Having been there 10 years earlier, I was amazed at the progress — the new buildings under construction and old ones that had been restored and modernized. People were well dressed, the cars were recent Western models, and there was not a single sputtering Polski Fiat to be seen. Crossing the bridge into Gorlitz, I viewed two towns as more alike than different.

In his 1992 Summer Meditations, Czech President Vaclav Havel mused about what a post-Communist Eastern Europe might look like:

Life in the towns and villages will have overcome the legacy of grayness, uniformity, anonymity, and ugliness inherited from the totalitarian era.... Every main street will have at least two bakeries, two sweetshops, two pubs, and many other small shops, all privately owned and independent....

Havel’s words had come to mind a few days earlier when I changed buses in the grimy Polish town of Bolesiewiec. With an hour to spare, I set out from the dull, Communist-era bus station and came to the town’s busy main street. Seeing a steady stream of shoppers enter a small shop, I too went in and found a bake shop that offered an abundant selection of breads and pastries.

Sampling the tasty bread rolls, I realized that Havel’s fanciful vision had come to pass. If a town as remote and depressed as Bolesiewicz has a quality bakery and a fashionable pub across the street, then something of significance must be happening in Poland and post-Communist Europe.

And indeed that is the case. Poland has registered enormous progress since it emerged from the chaos and hyperinflation that accompanied the collapse of Communism in 1989.

Living standards have more than doubled. Poland’s economy has grown much faster than its neighbors and often twice as fast as in Western Europe. Since joining the European Union 10 years ago, Poland’s income gap with the West has narrowed, with per capita incomes having advanced from 50% of the EU average to 65% today.

Alone among European economies, Poland didn’t fall into recession in the aftermath of the 2008 global financial crisis. While growth has slowed over the last three years, a 2.4% advance in gross domestic product is projected for 2014. The once-reviled Polish currency has been steady against the dollar and the euro for a decade. Poland’s central bank chief says it is not a question of whether but when Poland gives up the zloty
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To the amazement of skeptics, 70% of Poland’s trade is with the EU and 30% of Poland’s population of 40 million is proficient in English.

In November 2011 at the height of the euro crisis, Poland’s Oxford-educated Foreign Minister Radek Sikorski gave a speech in Berlin that stunned many. Sikorski essentially begged for German leadership to resolve the euro crisis, saying that a collapse of the euro zone was the greatest threat to Poland’s security and prosperity.

Amid fears that a Greek exit from the euro would cause the common currency project to unravel, Sikorsky said he was more frightened than at any time in his 13-year ministerial career.

“I fear German power less than I’m beginning to fear German inactivity,” he continued. “You,” referring to Germany, “have become Europe’s indispensable nation. You must not fail to lead.”

Given the long history of Polish-German enmity, Sikorski’s speech was a landmark. But it also signaled a new partnership between the two Central European neighbors. Germany and Poland today have almost identical views on the euro and macroeconomic policy. Their economies are linked as never before, with German exports to Poland having increased 900% since 1990. Germany trades more with Poland than it does with Russia.

Leszek Balcerowicz, who as finance minister launched the “big bang” reforms that led to the Polish economic miracle, is firmly aligned with Germany on the euro debt crisis. He has repeatedly emphasized that in a common currency zone there is no other course than for profligate countries to tighten their belts, bring their financial accounts closer to balance, and restore market confidence.

Reflecting on this momentous change that no one anticipated when the Berlin Wall came down in 1989, it is appropriate that the European Union received the Nobel Peace Prize in 2012. The words of the Nobel citation are correct, “The European Union has transformed most of Europe from a continent of war to one of peace.”

Barry Wood has spent the past month traveling and reporting from Greece, the Baltics, Russia, Poland and Germany.

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